China GDP: economy growing steadily but recovery ‘unstable and unbalanced’, top economic planner says

National Development and Reform Commission (NDRC) vice-chairman Ning Jizhe wrote in a People’s Daily commentary on Friday
Nomura earlier this week lowered its projection for China’s third-quarter growth to 5.1 per cent following 7.9 per cent growth in the second quarter

China's economic recovery

Xinlu Liang

Published: 7:30pm, 6 Aug, 2021

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China’s economy is growing steadily, but the domestic recovery still remains unstable and unbalanced, a top official from the country’s economic planner said on Friday.

The world’s second-largest economy has, for the most part, recovered from disruptions caused by the coronavirus pandemic. However, manufacturers are still grappling with various challenges, including higher raw material prices, surging logistics costs and global supply-chain bottlenecks, meaning the pace of gross domestic product (GDP) growth is expected to moderate.

The new Delta variant outbreak, which started last month in Nanjing city and has since spread to several Chinese provinces, threatens to heap further downward pressure on the nation’s slowing retail spending.

Authorities have imposed lockdowns on a handful of cities, which also may worsen tourism and factory activities. Those factors, combined with the impact of flooding in central China last month, have analysts widely anticipating an exacerbated economic slowdown in the coming months.

Nanjing Delta outbreak adding new pressure to China’s slowing economy

“As the global pandemic wears on, the external environment is getting harsher and more complicated,” National Development and Reform Commission (NDRC) vice-chairman Ning Jizhe wrote in a People’s Daily commentary. “The domestic economic recovery still remains unstable and unbalanced, while momentum in demand growth is weak.”

China’s economy grew by 7.9 per cent in the second quarter of 2021, compared with a year earlier, and posted 12.7 per cent growth in the first half of the year. But it should be noted that those figures were against a low comparison base from a virus-hit 2020.

Looking forward, Nomura this week lowered its projection for China’s third-quarter growth to 5.1 per cent from 6.4 per cent previously.

Goldman Sachs did not lower its 6.2 per cent growth forecast for the third quarter, but said the potential impact could be 0.7 percentage points, adding that there are uncertainties about the duration of the latest coronavirus outbreak and likely stronger policy support.

The structural problems in employment are still salient … Stable employment leads to a stable economy

Ning Jizhe, NDRC vice-chairman

Several industries enjoyed better production and operations during the first half of the year, but some enterprises continue to struggle, particularly small businesses.

Ning said closer attention needs to be paid to new problems that have emerged amid China’s recovery, such as employment.

“The structural problems in employment are still noticeable,” Ning said.

China’s overall employment situation, though, remains generally stable, while household incomes are experiencing growth and the country’s balance of payments continues to improve, he said. The urban unemployment rate of 5.2 per cent in the year’s first half was also lower than expected.

“Employment is the foundation of people’s livelihoods,” he added. “Stable employment leads to a stable economy.”

China’s economy has evolved from a “high-speed” to a “high-quality development” stage, Ning wrote, with the country promoting and developing creative-driven hi-tech sectors and greener industries, while continuing to open up in the first half of the year.

Unlike in previous years, Beijing did not set a specific economic growth target in its 14th five-year plan for 2021-25, but will instead keep annual growth at “a reasonable range” with 2021’s GDP target “above 6 per cent”.

The NDRC said in March that this would give Beijing more “policy flexibility” to deal with uncertainties.

Ning said that leaders were confident that 2021’s economic targets are achievable, but he cautioned against risks and challenges facing the economy this year. These included an unstable economic recovery, limited consumer spending and insufficient investment growth, as well as difficulties faced by small- and medium-sized enterprises and individual industrial and commercial households.

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